Opening Markets, Guarding Farmers: Balancing Trade Deals and Agriculture

India's Trade Outlook: Impact of US-Israel-Iran Conflict and Recent Trade Deals

Key Takeaways:

• India's trade is set to be impacted by the US-Israel-Iran conflict, with potential inflationary pressure on agricultural and food imports.
• Recent trade deals with Oman, New Zealand, the UK, and the European Free Trade Association (EFTA) may face adverse impacts due to the conflict.

Agriculture Trade

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

India's agricultural exports have risen from USD 39.1 billion in 2014-15 to USD 51.9 billion in 2024-25, driven by rice, marine products, spices, meat, and sugar. However, imports have also grown, with edible oils, pulses, dry fruits, and select high-value foods dominating the imports.

India's agricultural trade surplus has declined from USD 17.9 billion to USD 13.4 billion over the same period, due to increased imports of edible oils, pulses, and high-value food items.

FTAs and Trade Growth

Between 2020-21 and 2024-25, India's merchandise trade with countries covered under Free Trade Agreements (FTAs) grew by 92%, compared to 41.5% growth in India's global trade.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Country-Specific Trade Deals

• Oman and the UK: Low-risk export expansion agreements, with potential for duty-free access for marine products, boneless buffalo meat, eggs, processed foods, and selected oils.
• Australia: The Economic Cooperation and Trade Agreement (ECTA) has led to significant growth in Australian agricultural exports to India, from USD 329.6 million in 2019 to USD 1.14 billion in 2023.
• New Zealand: The agreement with New Zealand may introduce structural risk due to the country's efficient dairy exports, but offers limited export opportunities for India.
• EU: The agreement with the EU may open high-margin segments for Indian processed foods, tea, coffee, spices, table grapes, and marine products, with potential for increased exports to the USD 53.6 billion seafood market.

Future Outlook

The US-Israel-Iran conflict and recent trade deals will impact India's trade outlook, with potential inflationary pressure on agricultural and food imports. India's agricultural exports and trade surplus may be affected, and the country's trade agreements with various countries will require careful management to mitigate potential risks.